Consultancy firm Cornwall Energy has published research suggesting that Government schemes designed to subsidies and support low-carbon energy could add up to £100 to households’ annual energy bills within the next five years.
“The cost of policies to support renewable electricity and ensure the lights stay on in Britain will increase sharply over the next couple of years despite cuts to green subsidies.”
The research refers to four government schemes that it says will push bills up for energy users.
The four schemes are: “the Renewables Obligation; the Small-Scale Feed-in Tariff scheme, Contracts for Difference, and the Capacity Market.”
According to Cornwall Energy’s research, households will see an 84% increase to their energy expenditure by 2017/18, compared to what they are paying currently, as a result of these schemes. This cost will continue to increase over the following years, so that by 2020/21, each household’s bill will be more than £100 higher than it is today – an increase of around 124%.
Of the four schemes referenced, all but the Capacity Market Scheme fall under the purview of the Levy Control Framework, an initiative designed to cap spending on renewable subsidies in order to prevent customers from shouldering too much of a financial burden.
Cornwall Energy estimates that expenditure from the three schemes that do fall within the LCF will reach around £7.7 billion by 2020/21.
While this is around £100 million over budget, it is a far more optimistic estimate than that given by the Office for Budget Responsibility. Back in July 2015, the OBR estimated that the overspend on the LCF would be around £1.5 billion.
“Nonetheless, the figures who that the government is likely to exceed its LCF budget in every year from 2016-17” said an article on Cornwall Energy’s website.
A Department of Energy and Climate Change spokesperson said that the government was doing all that it could to prevent households from paying too much for government schemes promoting energy security and renewable power.
They said: “Through the halting of subsidies for onshore wind in the Energy Act, to added competition driving down costs in contract for difference auctions and the capacity market, our actions have shown that we will be tough on subsidies in order to keep bills down for our families and businesses, and ensure value for money.”
In terms of value for money, the capacity market scheme has come under criticism since its introduction. The scheme works by offering energy companies a guaranteed price for the energy they produce, in exchange for a guarantee that they will produce a set amount and remain on standby in case of periods of peak demand.
The problem, say critics, is that a lot of the money given out has gone to plants that would have stayed online regardless of subsidies granted as part of the scheme, leaving households paying more for something they would have received anyway.
Summing up the research conducted by Cornwall Energy, the group’s managing director, Jo Butlin, said: “While the future path of wholesale prices remains uncertain, policy costs are moving only in one direction. Our research shows a confluence of factors serving to push these costs up notably in the next couple of years, though important drivers that could yet change the outlook remain beyond anyone’s control.”
